How to use Pivot Points - Part 1 | Vantage FX

Vantage FX (www.vantagefx.co.uk) look at how to use Pivot Points in Forex Chart Analysis

Understanding Pivot Points

Pivot Points are useful for intra-day trading, and today we are looking at an hourly euro futures graph, rather than spot, for the sake of transparency.

Pivot Points calculate levels of key support and resistance and a central rate. This lasts for the whole of the next day and are based on the previous day's range. We can use a formula to calculate Pivot Points where P = (High + Low + Close) / 3. This is the central rate for one day's trading, and the number is then used to create support and resistance levels. We can see that the central rate of Friday's trading was 1.3555.

The highest resistance point = High + 2 * (PP - Low). Support levels are used in a similar way. Today we have a small range as it is a US holiday. The Pivot Points tomorrow will be narrower and possibly a bit higher than today, were we to close at the higher end of today's range.